It was the biggest day in the young Beatles’ fledgling career: an audition with Decca Records. However, rather than showcase such high-energy Beatle originals as “I Saw Her Standing There”, or “The One After 909”, Brian Epstein, the Beatles’ Manager, focused the group’s efforts on sappy show tunes and languid pop standards.

The result was a listless audition and the ultimate rejection of the world’s most successful recording act by the otherwise astute Decca Records.

When you complete this reading, you will be able to answer the following question:

a. Sports writers are to athletes
b. Theatre critics are to actors
c. Band managers are to musicians
d. All of the above

VC are to Entrepreneurs as ________ are to _________:

That was the last time Brian attempted to control the Beatles’ musical direction. As their career progressed, Brian focused on what he did well: dealing with the financial aspects of the Beatles’ money machine.

Several years later, after apparently forgetting his role in the Decca audition debacle, Brian made the mistake of offering his unsolicited advice to John Lennon during a Sgt. Pepper recording session by telling him "I don't think that sounded quite right”. John did not miss a beat, saying, “Slag off Brian. You stick to your percentages and we’ll look after the music.” Brian quietly sulked out of the studio and never returned.

In this instance, John Lennon did what many entrepreneurs fail to do with respect to managing their VC. John made it clear to Brian that the Beatles’ role was to ‘make the product and tend to operations’, while Brian’s role was to ‘count the money’. If your VC offers you gratuitous advice regarding your operations, you must communicate a similar (albeit a bit less pointed) role delineation.

Kick your VC ‘out of the studio’, just like you would a skanky groupie. You are in the band, your VC is not. At first, they might be able to help you book a few gigs, and maybe even pull together your first tour, but they are not qualified to tell you what notes to play, or what lyrics to sing. If they do, and you listen to them, you are almost guaranteeing that you will never have a ‘hit’.

Seeing is not Doing
Observing successful execution is not the same as performing successful execution. Operational advice from a VC is akin to Brian Epstein giving Paul McCartney voice lessons. It would not make sense for Paul to follow such guidance, just as it does not make sense for you to take operational advice from a VC who has never ‘done it’.

At the height of their fame, the Beatles were asked, "What excites people so much about your music?” to which John Lennon replied, "If we knew that, we'd start another group and become managers."

The same could be said of most entrepreneurs. If operating a startup were that easy, entrepreneurs would just invest a few dollars, sit on the sidelines, and let others do the heavy lifting – oh wait a minute, that’s what VCs do, isn’t it…?

Let’s review:

a. Sports writers are to athletes
b. Theatre critics are to actors
c. Band managers are to musicians
d. All of the above

VC are to Entrepreneurs as ________ are to _________:

The answer, of course, is “d”. The reality is that VCs play on the periphery of the entrepreneurial world, and sometimes they confuse their peripheral ‘involvement’ in a venture’s success with something more than mere observation.

Treat your VC like a VIP. Give them front-row passes to your shows, early releases of your CDs and let them schmooze in the greenroom. However, do not let them think that they are part of the band and never, ever let them get away with telling you, "I don't think that sounded quite right”.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.